The Federal Board of Revenue (FBR) has successfully collected Rs2.23 billion as Capital Value Tax (CVT) on foreign assets owned by resident individuals.
According to sources, this collection was made by the Large Taxpayers Office (LTO) Karachi, the primary revenue collecting arm of the FBR, during the first 10 months (July to April) of the current fiscal year.
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Sources indicate that the Automatic Exchange of Information (AEOI) Zone of the LTO Karachi was responsible for the majority of the collection, with a significant amount collected in February and March as the drive gained momentum.
It is believed that the tax authorities faced challenges after nominating influential individuals for recovery, potentially leading to a slowdown in their efforts.
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The CVT on foreign assets of resident individuals was introduced through the Finance Act of 2022. The FBR’s interpretation includes an inclusive definition of foreign assets, encompassing assets held abroad indirectly and under the beneficial ownership of the resident individual.
The value of foreign assets is determined as the total cost of the assets in the relevant foreign currency on the last day of the tax year, converted into Pakistani rupees according to the exchange rates notified by the State Bank of Pakistan. If the cost of foreign assets cannot be accurately determined, the fair market value on the last day of the tax year is used, with the rupee conversion applied accordingly.
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Resident individuals holding foreign assets are required to pay CVT when filing their income tax return for the tax year. The officer of Inland Revenue has the authority to issue an appealable order for CVT recovery, including default surcharge, from individuals who fail to pay or collect CVT or neglect to remit it to the Federal Government. In such cases, the person is held personally liable.
The FBR’s successful collection of CVT on foreign assets highlights its commitment to ensuring tax compliance and generating revenue from resident individuals’ overseas holdings.
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